After 11 hours of talks EU Finance Ministers and IMF Managing Director Christine Lagarde failed to reach an agreement on Tuesday to give Greece the next tranche of its bailout package.

European finance ministers concluded the meeting without hosting a press conference or disbursing Greece the next installment payment of an emergency bailout loan that has been delayed for several months due to internal divisions with Greece’s international creditors.

Tuesday’s meeting in Brussels came a day after Moody’s downgraded France’s credit rating, signaling concerns over Europe’s debt crisis which has moved to the periphery in recent weeks as a result of the U.S. presidential election and the follow up attention with the looming “fiscal cliff” in the U.S. budget.

Greece’s Financial Problems

In short, €32.6 billion ($41 billion) loan is needed to be disbursed for Athens to pay its bills and avoid liquidity problems.

Athens has a large repayment due in mid-December.

Euro area finance ministers have been engaged in debating ways to lower Greece’s high level of public debt, which is expected to rise to 190 percent of gross domestic product (GDP) by 2013.

If no action is taken and current policies remain unchanged, Greece’s debt burden will only fall to 144 percent of gross domestic product in 2020.

The IMF is focused on Greece achieving its debt to GDP level of 120% by 2020 and has asked that Greek debt held by the European Central Bank or loans extended by European governments will be written off.

The IMF has previously indicated that additional aid for Athens will have to come from Europe.

But European governments in the Euro group, led by Germany, refuses to write off Greece’s large loans, explaining it as illegal.

Instead Eurogroup finance ministers want to grant Greece two extra years, to 2022, to bring its debt to 120% of GDP.

The real problem at the center of the conflict lies with two complicated matters: plugging a funding gab and achieving a sustainable debt path for Athens.

Recently, EU finance ministers in the Eurogroup gave Greece’s government two more years to meet its budgetary target.

Rather than achieving a primary surplus (not counting the servicing debt) of 4.5 percent of GDP by 2014, Greece now has until 2016 to meet its target.

However, the two year delay until 2016 means that Athens is expected to need an additional €32.6 billion in bailout funds in addition to the €240 billion that the “troika” ( European Commission, the IMF and the European Central Bank) has already pledged to keep Greece’s government afloat.

Granting Athens two extra years carries the added risk that it will take longer for Greece to reduce its debt load to 120 percent of GDP by 2020.

Despite the magnitude of the financial challenges, there remains a level of optimism that a deal will be worked out in the near future to close the funding gap.

“We have a series of options on the table on how to close the financing gap,” German Finance Minister Wolfgang Schaeuble told reporters following Tuesday’s meeting in Brussels.

The chairman of the Eurogroup, Jean-Claude Juncker, said after the meeting that they would meet again on Monday November 26th.